Here is an excerpt from an article written by John Hagel III and John Seely Brown for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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Mindset is everything. If that statement seems too strong, consider that we bring these basic assumptions to every decision and action we make. Left unexamined, they may unnecessarily restrict us or lead us in the wrong direction altogether. Perception may not truly be reality, but when it comes to how we approach challenges and opportunities, mindset determines the world we encounter and possibilities we apprehend. Achieving the power of pull requires us to make our assumptions explicit and examine them in different contexts — testing, challenging and refining.

As we began to discuss in our last post, adapting to the Big Shift and harnessing the potential of pull requires embracing a new mindset. This posting will focus on another key set of assumptions.

In her 2006 book, Mindset: The New Psychology of Success, Stanford Professor Carol Dweck distinguishes two extremes of the mindsets people tend to have about their basic qualities:

• In a fixed mindset, “your qualities are carved in stone.” Whatever skills, talents, and capabilities you have are predetermined and finite. Whatever you lack, you will continue to lack. This fixed mindset applies not just to your own qualities, but to the qualities of others.

• In a growth mindset, “your basic qualities are things you can cultivate through your efforts…everyone can change and grow through application and experience.” Qualities like intelligence are a starting point, but success comes as a result of effort, learning, and persistence.

The distinction between fixed and growth mindsets has tremendous implications — as individuals and organizations — for how we address the growing pressures around us.

The Mindset Paradox: The greatest threat to success is avoiding failure. One of the most provocative aspects of Dweck’s work is what it says about our approach to challenges. In a fixed mindset, you avoid challenging situations that might lead to failure because success depends upon protecting and promoting your set of fixed qualities and concealing your deficiencies. If you do fail, you focus on rationalizing the failure rather than learning from it and developing your capabilities. With a growth mindset, you focus on learning and development rather than failure and actively pursue the types of challenges that will likely lead to both learning and failure. This sounds a lot like the questing disposition we have discussed previously.

Mindset profoundly shapes key business practices:

Business Ecosystems. If you have a fixed mindset, you believe that there are a finite set of smart people and valuable resources outside your company. The challenge is how to identify, connect with and mobilize them to deliver more value to the marketplace — static resources tied together in a static ecosystem. The ecosystem benefits from the network effects of adding more and more participants because more diverse capabilities are connected and accessible.

If you believe that both the resources and the ecosystem itself are dynamic, then the role of the ecosystem is not just to connect and mobilize existing resources but to build relationships that help all participants get better faster. This leads to a more powerful form of increasing returns — not just network effects but new mechanisms to accelerate learning and performance improvement — as each participant learns faster as more and more participants join the ecosystem.

Talent Management. A fixed mindset leads you to focus almost exclusively on attracting and retaining talent. The assumption: each person’s skills and capabilities are set. You will tend to devote too many resources to those with a perceived stock of knowledge and overlook (and eventually lose) employees with limited stocks but great learning potential. Worse, because you underestimate the value of learning and development, you won’t likely get the most out of those employees you do value.

With a growth mindset, you understand that individual and organizational capabilities can be cultivated and developed, to improve performance and to expand in new directions. You focus more on talent development, creating work environments and practices that enable employees, regardless of work classification, to develop new skills and to learn by working with others, by problem-solving and experimentation.

Relationship-building. A fixed mindset fosters a zero-sum view of the world: if you win, I lose. With a fixed and finite set of value, the only question is how to allocate it. This perspective fosters conflict and mistrust and, not surprisingly, relationships governed by relative power, tend to be transactional and are rigidly defined to protect each party’s share of the value.

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To read the complete article, please click here.

John Hagel III and John Seely Brown are co-chairmen of the Deloitte LLP Center for the Edge, and have written several books focused on technology and innovation. Their latest is The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, co-authored with Lang Davison and published by Basic Books (2010).